One thing traders tend to think about too late in their pilgrimage to success is the list of symbols, or tickers they’re going to trade. I don’t think you should confine yourself to just stocks, so I’m being broad with the title of this, but you should really consider the products you’re going to trade on a regular basis. This is easiest just speaking from my experience, and the way I approached this in the infancy of my career was to just trade whatever was hot. Whatever the stock of the moment was. Whatever was moving. Truth be told, it was whatever “setup”. I didn’t want to limit the number of tickers I was reviewing because I really wanted to hunt down the best Squeezes. Find anything from the list above that also had a daily Squeeze, and I wanted to be involved.
I can understand that point of view, but experience has shown me there’s a lot to be said for narrowing your focus. To pick a very specific list of names and focus on these with very clear timeframes, well defined setups and master them before moving to other areas of the market. John said it best, if you swim in the ocean do you come back upset that you didn’t touch all the water? Be ok with your carefully measured area of the playground and it’ll help you create a disciplined trading plan that you trust, and can execute on reliably. We can do so much in the market, and we can be active in so many places. Sometimes the tough part is narrowing our focus and executing a plan.
In an effort to help push this idea forward I’ve compiled a few watchlists I thought might be helpful. I’ve chosen 13 symbols one, because it’s a Fibonacci number. I’ve found using these numbers in my life to be somewhat of a hobby, plus it helps you memorize the sequence. Traders would do well to focus on something like these 13 tickers (you don’t have to use mine exactly) learn what strategies fit their personality best and focus there until they can produce the track record they’re looking for. More advanced traders might consider 21 or 34 symbols they review each and every day, but past that you run into 55 and that’s the upper end of what I think should be a focus of constant review.
Here’s the list of 13 I follow along with a few reasons why for each.
Starting with AAPL may seem a little cliche, but it has several of the qualities trader should look for in a stock. The one I want to point out here is liquidity. AAPL is one of the most liquid stocks in the market, and it’s options follow suit. This makes for tighter spreads and better fills and a great place to find a foundation in trading.
There are several things I like about AMZN. The first that comes to mind is their website! Amazon.com is so convenient, the reviews tend to be helpful – I’ve been a Prime member for over a decade now and can’t see myself cancelling the service. One of the qualities that land it on this list for trading is that it tends to have good swings. Something you can really do something with using an options spread. It also tends to work well with the daily Squeeze.
By this point you may be seeing a theme in these stocks. Every symbol mentioned to this point is a component of its corresponding SPDR ETF. AAPL is 2nd in XLK. AMZN is 1st in XLY. MSFT is 1st in XLK. Focusing on these primary components will help you get a feel for the broad market, and ensure that you’re in something that is moving if the markets are moving.
I do enjoy trading services I use. I’m not confined to that, but it’s something Warren Buffet spoke to and it’s something I consider as I create these lists. NFLX is another subscription I’ll likely never cancel, but between their enthusiasm about burning cash and steadily increasing competition the stock looks good for continued distribution.
JPM – here we are again with another service I use. Their service has been decent enough though I’m really not a fan of their fees. Personal opinions aside, this is a good ticker to follow because it’s the 2nd heaviest in XLF. If you’re following the markets, you need to follow financials. I also like JPM for it’s great liquidity and tendency to be good for pinning during monthly expirations.
Facebook is a ticker I sometimes feel like I have a hard time getting behind, but another snippet of wisdom I’ve taken from John – they’re the only game in town. And for the market they appeal to, I don’t think it’s going anywhere. The new Facebook Horizon should be an interesting foray into virtual reality. It’s not something I’ve tried yet, but I do think it has a place in the future. It shares similar qualities noted in previous names, and is also the most heavily weighted component of XLC, the newest of the Sector SPDR ETFs.
SMH is our first ETF on the list and it comes up because I’ve found it to be a good vehicle for the ratio spreads I like to work with. It tends to have a good IV Rank and when it gaps up big on something related to China, this has been a good spot to sell 2 or 3 delta .20 calls, then buy something like the delta .40. Provided the transaction goes for a credit, you have no risk to the downside and a very forgiving breakeven point. Since this is and ETF you’ll never wake up and find that SMH is being taken over or is going out of business, and when working with naked strategies that’s always a plus.
TSLA is on this list because it’s one of the tickers I could stand the most improvement with when trading. You could always argue to just avoid it, but I think there’s a lot to be learned from the way it’s currently trading. You’ve got to think theta positive, and you’ve got to be willing to give your ideas some time to work. One day we may see more short covering in this stock – I hear that can be fun to play, so I enjoy keeping this as part of my daily review.
Pintrest is on the list as a spot where I learned something and felt like it was worth making note of. When PINS first hit the scene, I couldn’t figure out why someone would want to buy this stock. I had an account, I know my wife Mandy enjoyed using it, but I just had a hard time getting behind it as an investment. Then I took the time to read some of the research from Ophir Gottlieb. Most of you know him as the founder of the CMLviz tool, an excellent back-test for options, but his research is well thought out and enjoyable to read. He has some great thoughts on PINS and this will keep it’s place on my daily review as I look for it to eventually make new lifetime highs.
Salesforce is interesting to me just as a high flying tech name. There are several of these you might choose from. NOW, WDAY, TWLO all could easily hold this spot, but we used to use this at Simpler and these big tech names can be the “canary in the coal mine”. They can also be something that’s almost targeted in bear markets. They can really take the brunt of the selling, and that’s something to keep an eye on.
CMG is on this list to show another personality of options trading I like. So far we’ve covered names that all generally have pretty good liquidity. CMG is on the other end of the spectrum. It’s not as extreme as say AZO or BKNG, but these wide spreads can be a trader’s best friend – when you’re right. If you can get comfortable with 100% of the risk you’re using, these can move big and are worth looking at for a certain kind of trader.
PYPL is interesting to me as so many people I know use Venmo. It’s an interesting way to tie social networking into a payment processor, and the reality of including this name is because I want to have something in this space. PAYC is another that could hold this spot, but it’s not nearly as liquid, nor do I use any of their service. PYPL comes in further down the list in XLK and is worth considering if you find a setup in either.
Last I’m including Bitcoin. This is part of why I went with the title of 13 symbols. Bitcoin is a cryptocurrency, not and ETF or stock. I also include /BTC because it made for an excellent trade in 2017. This year hasn’t been as hot, but when you talk about something that could really be a part of the future, I think this could play an important role. Between the fact that it’s all digital and that it’s decentralized, this is interesting to me. Bitcoin also tends to move big around daily Squeezes and the futures carry a 5 to 1 risk, so you can really catch some big swing moves if that’s a style of trading you enjoy.
Ultimately this list is just my take. I don’t think you need to take it exactly and focus only on this, but do consider narrowing your focus. Consider trading names that carry weight in the broad market. Consider trading something you can get in and out of fairly easy and work on nailing down a consistent trading plan that you enjoy putting to work each day.